Wired unplugs stock offer again

FROM EXAMINER STAFF AND WIRE REPORTS

Published 4:00 am, Friday, October 25, 1996

The publisher of Wired magazine once again has canceled its initial public offering.

In a filing with the Securities and Exchange Commission Friday, Wired Ventures Inc. - the San Francisco Internet media company - blamed "adverse market conditions" for scrapping what would have been its first stock sale.

Wall Street observers said investors balked at buying shares in a company that has plenty of attitude but a scarcity of profits. But the deal also has been clouded by questions over whether the company may have run afoul of U.S. rules barring stock issuers from touting the offering before its sale.

Signs that the Wired IPO was collapsing were evident Thursday evening, as the investment banks underwriting the deal cut the price of Wired's offering to $8, down from $12 a share, and trimmed the number of shares offered from 4.75 million to just 3 million. Even so, Wall Street wasn't buying.

"It's a watershed event," said David Simons of Digital Video Investments in New York, saying it indicated investor were becoming more critical of Internet-related ventures. "A year ago they probably could have gotten anything they wanted. Now, investors are saying, "wait a minute.' "

Meanwhile, Wired publisher Louis Rossetto may have inadvertently broken SEC rules by being too noisy during the company's "quiet period."

According to TheStreet.com, an on-line newsletter that follows Wall Street, Rossetto circulated an e-mail last week meant to boost the morale of the 300-plus people who work for Wired Ventures, which includes the print magazine, as well as HotWired, the on-line edition, and HardWired, the book-publishing division.

Rossetto's e-mail called Wired Ventures "a company of great people who make great products," and blamed "bad journalism" for undermining Wired's image on Wall Street.

Although intended as an internal memo for employees, the e-mail was posted on The Well, a Sausalito-based on-line bulletin board with 10,000 subscribers. From there it was leaked over the wider Internet. The result: Rossetto's optimistic views on his company were sent around the world, just before the planned IPO.

Companies going public can't tell potential investors anything that isn't in the prospectus during the "quiet period" between when the company registers to go public and a few weeks after it has begun trading.

But Rossetto's memo labelled financial press reports skeptical of the IPO "shoddy, if not malicious." In the memo he said the company was "hampered in our ability to defend ourselves by the SEC's so-called "quiet period, ' " and talked about the company's "great business" plans for Wired, HardWired and Wired TV's coming Netizen television show.

Meredith Cross, the SEC's deputy director for corporation finance, said the agency's policy isn't to comment on any company's filings. But John Stoppelman, a Washington lawyer who is a former chairman of the SEC's task force on investigation rules, said the memo's Internet circulation was likely to get the notice of SEC regulators.

Wired spokeswoman Taara Hoffman said the company had no comment about the public offering or the e-mail flap.

Wall Street analysts said the Wired deal was rejected because investors were skeptical of the company's ability to make money.

Wired, with its flashy design and articles laced with attitude, has a paid monthly circulation estimated at 325,000 and is profitable. But its spinoffs, HotWired and HardWired, cost more than they bring in, putting the company as a whole in the red.

As a result, Wired Ventures has never turned a profit. The prospectus for the stock offering warned investors the profit picture wouldn't change any time soon because investments in these new businesses were expected to exceed revenues "for at least the next 18 months."

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The last time Wired tried to go public was in July, when the company also backed off because stocks were on a slump on Wall Street.

The latest attempt had been dramatically scaled back, with only 4.75 million shares expected to be sold to raise up to $48 million, according to Robertson, Stephens & Co., the co-manager on the deal. That is far less than the $66.5 million Wired hoped to raise just weeks ago at as much as $14 per share.&lt;

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